Obama forcing refinancing would NOT be breaking private contracts.

[Pab Sungenis]

Rep. Jim Moran claimed that Obama had the power to force a refinance of every mortgage in America if he wanted.

Some here are claiming that if he were to do it, Obama would have to have the power to break private contracts, which no President can (or should be able to) do.

But that power isn't needed. No contracts need be broken and here's how.

With the help of the Treasury and the Federal Reserve, the government can set up what's known as a "bad bank," a new lender of last resort. This entity would be empowered to buy up mortgages.

This government-owned bad bank can then negotiate with current noteholders to buy up troubled mortgages. Most of these could probably be obtained for pennies on the dollar, some would need to be bought at near full price. The original contracts are thus fulfilled, not broken.

The bad bank can then renegotiate each of the mortgages to avoid foreclosures. New interest rates and payment schedules can be drawn up. If need be, some could even be crammed down to lower principal where houses are under water financially. For those that want to walk away from their loan, the bad bank could take title in exchange for writing off the debt, then sell the house to an investor.

Once all of the assets of the bad bank are renegotiated, the bad bank could then either administer the loans itself, or sell the new loans off to investors or financial institutions to take over administration. This would get the mortgages off the hands of the government.

This is how the banks should have been bailed out in 2008-2009. And it's what should happen now. The government already has the power and ability to do this, all that is needed is the will.

[TwilightGardener]

1. This would be an absolutely massive and expensive undertaking. Has no chance in hell of passing.

[Pab Sungenis]

2. Doesn't need to pass.

The government already has the power.

[TwilightGardener]

3. TARP and all the bailouts had to go through Congress. I seriously doubt

Obama could just order the Treasury to buy up many Americans' mortgages, renegotiate them, and sell them. I don't see any way this could happen, legally or in a practical sense.

[NYC_SKP]

4. What you're describing is that the government pay off over-priced mortgages.

I appreciate that some banks would be happy to sell off assets at less than the unpaid principal, but I don't see it happening across the board.

I do, however, think that there is some relief that can be had.

And, actually, there already has been some relief created for upside-down homeowners with incomes under a certain level, at least in California.

Homeownership is speculative, it always has been, it can be risky.

If there's a solution that the Congress will not prevent from coming about, I'm all for it.

:patriot:

[boston bean]

5. paying off the principal is not what is expensive. It's the interest that is expensive.

If the gov't were to buy the mortgages, and then re-issue/negotiate them at a lower interest, they would actually be making money. And people would have money in their pockets.


And it's a wash for the gov't. Didn't cost them a penny.

[PSPS]

11. Not true. Even 0% interest won't help most.

Most of these problem mortgages were the result of NINJA loans. Even at 0% interest, the borrower could never afford the payments. They never should have taken out the mortgage in the first place, but they did so anyway because they thought they could get away with it by "flipping" before the balloon payment was due.

[boston bean]

12. difference is, reward Wall Street for the bad loans, or help the people.

Which side are you on?

There are many more people who bought in good faith, and were not house flippers.

And until you do the math and calculations, you cannot say which would cost more, the cost of defaulted loans or those who just need to be re-negotiated.

to be honest with you, I could really care less if a house flipper got a low interest rate and then flipped their house. Why is it so important to you.

They still would have paid interest.

I don't agree that most people were out to scam the system. You do. whatever.

I think the banks did most of the scamming.

[PSPS]

19. Sorry, but the facts don't jibe with your position

Alt-A, NINJA and option-ARM loans make up the lion's share of problem mortgages. The people who took out these loans knew very well that, without them, they couldn't buy a house. In other words, they couldn't afford to buy a house and should have rented instead. But, instead, they took the loan out thinking they could get out from under it before they had to start making real PITI payments.

I have no sympathy for these people. Perhaps you're one of them. I don't know. But rewarding such bad behavior will only result in more of it -- another "bubble" in a way -- all at the taxpayer's expense.

Sorry. No sale.

[boston bean]

20. This exact reasoning is why I was against the bank bail outs. They should have

been bailing out people.

Instead, we end up rewarding the already super rich, while people who could afford the lower rate, prior to the adjustment, get shit.

I guess there are two ways to look at this. Blame the people for taking out the loans. Or blame the bank for the bad investment and then reward them for it.

Put me in the group of blaming the bank for the bad investment, and not wanting to reward them for it.

[msongs]

21. life is not an either or deal and there are more than two ways to look at situations nt

[boston bean]

22. so what is another way to look at it. I'm open to hearing it, and taking it all into consideration

and maybe I might even change my mind.

[Tejas]

15. Fine, you go first.

And it's a wash for the gov't. Didn't cost them a penny.

It's not the gov'ts money, it's yours and mine. The interim maintenance cost and cost of new beaurocracy et al will be there, let's just agree that they'll spend YOUR money first on the resulting debacle.

[boston bean]

17. I don't care who manages my mortgage. if my rate goes down, all the better.

You are acting like there is no value in the house?

[Tejas]

26. You'll care when

your taxes go up to pay for yet another beaurocracy. I'm guessing you think this whole idea would result in no cost whatsoever to you (or me).

[boston bean]

27. I would be happy to have my taxes go up for something good.

I would be happy to have my taxes increased for single payer.

All of this would even out in the end, and people wouldn't be crippled by a minority in this country who can't seem to get enough of the green and are basically stealing it.

I'm sure I've paid somehow to give that bail out to wall street and banks.

[Tejas]

29. You sure do a lot of wishing and hoping.

"All of this would even out in the end" <--- the "end" would come when?




We'll just have to disagree, I don't see an end to their stealing. You might be able to afford it until "the end", some of us can't (or simply don't want to). Facillitating them by creating more beaurocracy sure won't encourage them to stop stealing. See how that works?

[boston bean]

30. we will disagree. I think people being able to refinance at a lower rate is a good thing.

not a bad thing.

And I don't think you have the facts that prove this would be costly to American Tax payers.

The problem is corporate America owns to much of this. The people have no control whatsoever.

A balance needs to be struck.

[Romulox]

6. In other words you propose that the taxpayers fund a third (forth?) bankster bail out.

:hi:

[boston bean]

9. The banksters don't want this to happen. If this was good for them

it would have already been done.

[customerserviceguy]

7. Ok, then who's going to eat the losses?

And there will be losses, either the lenders with mortgages to sell will dump them quickly, realizing a good bargain when they see it, or they will not want what Bad Bank is willing to pay for those notes, because they regard it as too little.

Where does the capital to do this come from? Do we borrow it (and if so, what happens to the debt ceiling), or do we print it (what happens to the inflation rate)?

[PSPS]

8. Rewarding bad behavior

So I take out a liar's (stated income) loan to buy that $600K McMansion on my $20K/year WalMart income. No problem, since my loan is a "pick a pay" where I just don't make payments and I'll flip the house before the balloon payment is due anyway. And, hey! Let's take a cruise and buy the BMW using the house's "appreciation" as an ATM!

Oops! Bubble burst! I'm left standing when the music stopped.

I'm under water! Help me!

So now you want Obama to gift me my house, BMW and cruise that I could never afford in the first place? On the taxpayer's dime?

Sorry. No sale.

[boston bean]

10. Rewarding whose bad behavior? nt

[Little Star]

23. That is not a accurate picture of what happened...

Sure, there were some people who bought homes they couldn't afford. The greater majority found themselves in trouble because of job loss.
That is not their fault!

I had these arguments with right wingers back when this all started. It is bull!

[PSPS]

24. Your premise is false

While some people found themselves in trouble because of losing their job, it certainly wasn't "the greater majority." But even if it were, it wouldn't matter. If one can't afford to make their house payment, whether it's because they lied to get the loan or lost their job and can't afford to make the payments, I don't want my tax money used to gift them their house. That's just silly.

[boston bean]

25. you sound just like Rick Santelli.

http://www.youtube.com/watch?v=jiCOb49vVVM

[Little Star]

33. Well, that's mighty Libertarian of you. n/t

[PSPS]

35. Well, OK. Free houses for everyone! Whatever.

[Lasher]

36. Well it's not free houses for everyone and that's the biggest problem.

I worked my ass off for 30 years and bought a modest house I could actually afford. I paid it off. Along comes a neighbor who bought a mansion he couldn't afford, one that looks like the one the Beverly Hillbillies moved into. My neighbor gets to keep his mansion thanks to a government bailout that I help pay for? Fuck that.

[PSPS]

37. Yeah, somehow you and I have magically become "libertarians" because we were honest.

To have true "liberal cred," you apparently have to have lied to buy more than you could afford, and then whine about having to actually pay off the loan according to the terms you signed off on because you happened to get caught lying and gaming the system. "I certify that the above is an accurate representation of my income." Yeah, right!

[leftyohiolib]

13. ya know, republican govnrs seem to have no problem breaking the contracts

of public employees

[ChandlerJr]

14. The mechanism is already in place

The Resolution Trust Corporation (RTC) was a United States Government-owned asset management company run by Lewis William Seidman and charged with liquidating assets, primarily real estate-related assets such as mortgage loans, that had been assets of savings and loan associations (S&Ls) declared insolvent by the Office of Thrift Supervision (OTS) as a consequence of the savings and loan crisis of the 1980s. It also took over the insurance functions of the former Federal Home Loan Bank Board.

Between 1989 and mid-1995, the Resolution Trust Corporation closed or otherwise resolved 747 thrifts with total assets of $394 billion.<1> Its funding was provided by the Resolution Funding Corporation (REFCORP) which still exists to support the debt obligations it created for these functions

I still own an office building purchased this way. I've been calling for this for years.

http://en.wikipedia.org/wiki/Resolution_Trust_Corporation

[boston bean]

18. good post. you would think the idea was akin to giving everyone a free house.

When that is not the case.

Some people just hate their neighbors, or so afraid someone might benefit more than them. And therefore no one should benefit. It's a sucky way to live. If something like this was done for the people, we all would benefit in one way or another.

It all just sort of makes me really sad.

[Tejas]

28. Reagan/Bush era S&L crisis - no thanks

I'd prefer not to endure the cost and resultant addition to the deficit again.

[ChandlerJr]

31. First: The Resoulution Trust Corporation was created to clean up

the mess of the S&L disaster, it didn't create it.

2nd: The dereulation of the S&L industry began and was facilitated during the Carter administration with his buddy Bert Lance at the controls.

The Depository Institutions Deregulation and Monetary Control Act, a United States federal financial statute law passed in 1980, gave the Federal Reserve greater control over non-member banks.

It forced all banks to abide by the Fed's rules.
It allowed banks to merge.
It removed the power of the Federal Reserve Board of Governors under the Glass–Steagall Act and Regulation Q to set the interest rates of savings accounts.
It raised the deposit insurance of US banks and credit unions from $40,000 to $100,000.
It allowed credit unions and savings and loans to offer checkable deposits.
(This allowed "hot money" into the home mortgage business. chjr)
Allowed institutions to charge any interest rates they choose.
Required banks be charged Fed Float for use of funds received before clearing between depository institutions.

http://en.wikipedia.org/wiki/Depository_Institutions_Deregulation_and_Monetary_Control_Act

Jimmy Carter:
Depository Institutions Deregulation and Monetary Control Act of 1980 Remarks on Signing H.R. 4986 Into Law.
March 31, 1980

http://www.presidency.ucsb.edu/ws/index.php?pid=33206#ixzz1bdCuuEGj

[Tejas]

32. and Reagan enabled it to the tune of almost 100 billion dollars

Yes, I too Wiki'd it and more, and you conveniently left out plenty about who it cost what.

No thanks.

[flvegan]

16. Due to the general noise and stupidity of that other thread

I chose not to read most of the responses there.

Problem is in the terms used. "Refinance" isn't correct, and the lack of understanding of contract law is almost hilarious. It seems what's suggested is not a refinance, but a modification. Whoa! Wait a minute, I seem to remember this really obnoxious guy here that used to quack on and on about how resetting the interest rate of every home loan would be such a vast improvement (people keep homes and pay taxes, banks/lenders make money and maybe God forbid create more jobs, dogs and cats live together mass hysteria type of shit)...oh yea, that was ME.

As usual, amongst the general noise in response to ideas like this is the underlying shitwittery of the "I'm not bailing the banks out again!" Guess what, muffintop, either way you are. It's not like they pay any actual taxes here. They just occupy space. That's a rant for another thread though. Force the banks to make their loans perform. Egads, the very thought of that. Won't happen lest the cockroaches we call Congress lose a donor or 10 (which then means that they might have to find real work).

Then, oh yes, THEN there are the folks that assume everyone who bought a home (homestead, to live in) right before this meltdown bought a $400k McPalace while slinging fries at McD's. Did that happen? Sure, a few. Not most. Could they afford the ultimate terms of the mortgage? Not all. Could they afford the initial, low interest terms? Duh. So, fancy that. Reset to the original (or near original for those interest only, etc loans) and see what happens. Lord above, we just might move forward.

Will folks still walk away from the idea and their debt? Naturally. We're Americans and we can't commit to shit, especially not the debt we personally take on. At least not when it's right-here, right-now giving us benefit.

But then, that's another rant for another thread.

[ms.smiler]

34. Pab Sungenis, I appreciate that you’ve put thought into how homeowners could be

helped in this economy. But the government and Federal Reserve have already purchased trillions of dollars in mortgages in the form of failed MBS from the Wall Street banks.

http://financialedge.investopedia.com/financial-edge/1110/What-Happened-To-The-MBS-Market.aspx

http://www.salon.com/news/opinion/feature/2010/05/01/trillion_dollar_fraud

Watch PBS Video – True Cost of the Wall Street Bailout

Federal Reserve 7.7 trillion
Treasury 2.7 trillion
FDIC 2.0 trillion

http://dailybail.com/home/true-cost-of-the-wall-street-bailout-pbs-video.html

Very good discussion and interview with Representative Marcy Kaptur

http://www.youtube.com/watch?v=gd7s6An9fcA&feature=player_embedded#at=19

Very good discussion and interview with Representative Brad Miller

http://www.msnbc.msn.com/id/21134540/vp/39582228#39582228

Personally, I agree with Representatives Kaptur & Miller, the loans should be put back on the banks that created them. Does anyone think that is likely?

Meanwhile, homeowners can sit and wonder if their mortgage loan was already placed on their taxpayer tab when they sit down to write out their next mortgage payment.

Our government has been busy across many administrations, enabling this fraud. It is so dear of you to hope the government would now do something positive on our behalf.

When did the Federal Reserve or the U.S. government foreclosure on any properties? No, that didn’t happen. Instead, the banks used their mortgage servicing companies to bring wrongful foreclosure actions and stole the properties from ill informed homeowners.

Why do you think document mills exist? They will create anything from a Promissory Note to a complete loan file.

Document mill price sheets:

http://www.scribd.com/doc/38591053/Lender-Processing-Services-DOCX-Document-Fabrication-Price-Sheet

http://www.scribd.com/doc/59444662/Doc-Shop-Offerings-Optional-Collateral-File-Creation-services-can-be-performed-as-needed-pg-48

Unfair, Deceptive, and Unconscionable Acts in Foreclosure Cases –

http://www.scribd.com/doc/46278738/Florida-Attorney-General-Fraudclosure-Report-Unfair-Deceptive-and-Unconscionable-Acts-in-Foreclosure-Cases

If it takes that level of fraud noted above to simulate ownership of a loan in order to foreclose, what level of fraud is necessary at this moment to simulate ownership of any performing securitized mortgage loan?

The banks set up MERS, their own privatized land records system to create an illusion for homeowners and our courts. Only the original mortgage lien is filed in our public land records with the life of the loan tracked secretly within the private MERS database.

The banks put investors money at risk in the first place, not their own, and then funded any loan they could. They constructed Mortgage Backed Securities they could count on to fail and purchased their Credit Default Swaps at sometimes twice the value of the loans. The MBS market blew up as expected and the banks collected those Swaps, then sold the garbage MBS to Uncles Ben & Sam and collected yet again. (The banks aren’t owed any money.)

The Promissory Note could be sitting over in the basement at the Federal Reserve for all anyone knows. Meanwhile in our public land records sits the original mortgage liens.

All the banks have to do, is use the mortgage servicing company they own to file a fraudulent Assignment of Mortgage in our public land records and pretend to have recently purchased the loan from the loan originator in order to steal the property and profit yet again from the same loan. The loan originator actually sold the loan years earlier, shortly after the loan was made and just prior to mortgage securitization.

http://blogs.palmbeachpost.com/realtime/2011/10/20/massachusetts-official-calls-for-foreclosure-freeze-based-on-documents-also-questioned-by-florida-attorney-general/

You are working off the premise that the loans were legitimate in the first place. Most of the mortgages contain fraud at loan origination subject to Treble damages. There alone, someone might already owe more money to the homeowner than the homeowner might owe.

Your idea might work with traditional mortgages, but securitized mortgages are a scam and an entirely different type of transaction and most people have no understanding of them. Only about 15% of mortgages haven't been securitized. Unlike a traditional mortgage, a securitized mortgage has two sets of books and the homeowner is only aware of the one set made available to them stating that money is due. That explains your belief that some honest debt remains that could be renegotiated.

The homeowner with a securitized mortgage is at no time given a full accounting of their loan, nor are they informed of what actually happened to their loan. Such a disclosure would after all interrupt the largest Ponzi scheme in history - designed, planned and implemented prior to the repeal of the Glass-Steagall Act.

Fannie is already acting much like a “bad” bank in that it launders properties for the banks. Often, after a foreclosure, the mortgage servicing company will Title over the property to Fannie. Part of this scheme includes a back door way for the “right” companies to pick up properties on the cheap from Fannie.

http://jacksonville.com/business/2011-06-19/story/houses-200-foreclosure-bargain-not-you#ixzz1PjVIEgvG

I researched one property in that article. That particular homeowner faced over $100,000 in supposed debt at foreclosure. Afterward, the mortgage servicer Titled it over to Fannie. I have no way of knowing at this time, how much money may have passed from Fannie to the mortgage servicer. Then Fannie sold the property off to an investment company for $1,500 and the U.S. taxpayer takes the hit.

Now, if Fannie can sell a home for $1,500 to some investment company, why couldn’t it be sold to the original homeowner or some other home buyer for say $2,000? Fannie, like the rest of our government, isn’t interested in helping ordinary people, only the banks.

Please understand that as investors via our pension funds, and as homeowners and taxpayers, we are the marks in this scam.

I don’t support options that will keep homeowners locked into fraudulent securitized mortgage loans. I do support options that extract homeowners from those same loans and there are some very fine people presently working on those options.

Just as an example of one option, 95% of homeowners in bankruptcy in New York are relieved of their securitized mortgages because the liens weren’t valid in the first place.

Quiet Title suits are another option for homeowners to address the fraud in their mortgage, clear their Titles, obtain their Deed and money damages for the harm done to them.

Fighting a foreclosure action is another option but it takes longer and is more expensive than a Quiet Title suit.



I’ve been researching mortgage/foreclosure fraud for 3 years. I recently filed a Quiet Title suit over a new MERS issue. 300 such suits were filed in PA & NJ and in 297 of those suits, the mortgage servicers are either voluntarily withdrawing their fraudulent liens or the court will strike them from our land records. My case is among the 1% going to trial and is closest to trial.

[Abq_Sarah]

38. "all that's needed is thhe will"

And firing up the presses at BEP.